Lawsuit dismissed in Batavia's Prairie State electricity deal

City of Batavia electrical customers can't sue consultants who advised city officials to buy into a controversial coal mine and electricity plant, a federal judge has ruled.

U.S. Federal Judge Rebecca Pallmeyer agreed ratepayers are suffering a raw deal, as electricity rates and sales tax were increased to pay for higher costs resulting from construction cost overruns and higher operational costs at the Prairie State Energy Campus in southwestern Illinois.

But if "negligent representations" on the costs of the plant and the quality of the coal were made, it was to city officials and a power cooperative to which the city belongs, not to the city's customers, Pallmeyer wrote. Negligent misrepresentation, under Illinois law, requires showing that plaintiffs relied upon the information defendants provided to make a decision.

But the utilities' customers had no ability to make those decisions, she ruled. The decisions were made by aldermen and the Northern Illinois Municipal Power Agency. Batavia, Geneva and Rochelle make up the power agency, and buy power through it.

"Assuming the truth of plaintiffs' allegations, as the court must at this stage (of the case), a number of parties - some with a financial interest in PSEC - made false promises and predictions about the costs and the viability of the power at PSEC, which led Batavia to enter into what now appears to be an ill-advised power agreement for which plaintiffs must now foot the bill.

"But unfortunate and unfair as plaintiffs' predicament may appear from their complaint, their allegations do not give rise to a tort claim for them against these defendants," Pallmeyer wrote.

History of suit

The late Batavia businessman Joe Marconi and eight other people filed the lawsuit in Kane County Circuit Court in August 2014. They sought to make it a class-action lawsuit.

They sued the Indiana Municipal Power Agency (IMPA); ISC, a subsidiary of IMPA; the president/chief executive officer of IMPA; a firm that provided a review of the plant proposal; and another firm that provided a review of the coal mine.

The case moved to federal court at the defendants' request. They argued that it should be heard in federal court because it primarily involved businesses and individuals from other states, and concerned damages of more than $5 million. Pallmeyer agreed. The suit claimed that customers may end up paying at least $19 million more than they should for electricity.

The suit alleged that on the same day in May 2004 that the Batavia City Council hired ISC to advise it about buying electricity, IMPA agreed to buy part of proposed Prairie State project and didn't tell Batavia about it. Several months later, IMPA advised Batavia to buy in. The month after that, NIMPA agreed to hire IMPA to advise it about matters including purchasing electricity,

Batavia must buy at least 50 megawatt hours from Prairie State, via NIMPA, for 27 more years. When it signed the deal, the council expected the cost to be $46 per megawatt hour. As of June 2014, the cost has been as high as $179 an hour, according to the lawsuit.

Batavia can sell the excess, but it is doing so at a loss.

More information

Batavia Alderman Nick Cerone has asked the city council to discuss the lawsuit's results, and any options the city may have to get out of the costs. "I'm not sure there are any," Cerone said Tuesday. He was not on the city council that signed the contract. The discussion might take place during the council's Aug. 25 committee meeting.

The people suing have until Sept. 4 to file an amended complaint. Their lawyer, Michael Childress, could not be reached for comment Tuesday.

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